B3 launches three new indices for public bonds linked to inflation

The new indices B3 Treasury IPCA Average Term 2 years (IB3 TPCA-PM2), B3 Treasury IPCA Term 5 years (IB3 TPCA-P5) and B3 Treasury IPCA Term 10 years (IB3 TPCA-P10) now serve as a reference to monitor the performance of investments in NTN-Bs (Series B National Treasury Notes) - federal public securities that pay a real interest rate plus the IPCA variation.

In practice, the new indices function as "thermometers" of the performance of NTN-Bs over three investment horizons: around two, five and ten years.

Hênio Scheidt, product manager at B3, stated, in a statement, that the new indices can be used as a reference by investors, resource managers, fund administrators, issuers of financial products and other market participants.

According to B3, in all three cases, five securities form the theoretical portfolios and undergo quarterly rebalancing to preserve the term characteristics defined in each methodology.

UNDERSTAND WHAT THE NEW INDICES ARE

B3 Treasury IPCA Index Average Term 2 years (IB3 TPCA-PM2)

The IB3 TPCA-PM2 was developed to monitor the performance of a portfolio with an average maturity of close to two years. To compose the index, the methodology considers NTN-Bs issued at least six months ago to be eligible.

The securities remain in the portfolio as long as they continue to meet the methodological eligibility criteria and fit into the defined term profile.

The result is an indicator focused on the shortest part of the real interest rate curve, reflecting the behavior of securities that, in general, present less volatility in the face of changes in interest rate expectations.

B3 Treasury IPCA Index Term 5 years (IB3 TPCA-P5)

The IB3 TPCA-P5 seeks to represent the performance of a portfolio of NTN-Bs with an average maturity of five years. As with other indexes in the family, only securities issued at least six months ago can be included in the portfolio.

The methodology selects the paper with the term closest to the objective of five years, in addition to four other NTN-Bs positioned immediately above and below this point on the curve. The indicator seeks to represent an intermediate exposure to real interest rates.

B3 Treasury IPCA Index Term 10 years (IB3 TPCA-P10)

It comes with a portfolio structured to maintain a validity of approximately ten years. Five securities make up the portfolio, including a central asset with a duration of close to ten years and other securities positioned around this reference point.

Asset exclusion also occurs when they no longer meet the inclusion criteria. By concentrating longer securities, the index seeks to reflect the behavior of the longest section of the real interest rate curve and tends to be more sensitive to changes in inflation expectations and long-term interest rates.

TRAILED ETFs

The new indices also become part of B3's portfolio of fixed income indicators, which serves as a reference for index funds (ETFs) - products traded on the stock exchange that seek to reproduce the performance of a reference index, such as the Ibovespa, in Brazil, or the S&P 500, in the United States - in addition to other investment strategies.

Currently, B3 has 16 fixed income indices, eight of which include ETFs.

SELIC TREASURY INDEX AND FIXED INCOME ON THE STOCK EXCHANGE

In April this year, B3 launched the Treasury Selic Low Turnover B3 index (ISELIC Low T B3), which tracks the average performance of public bonds linked to the basic interest rate.

It was developed to act as a reference for investors who own the asset and managers who use the product in fixed income strategies. The profitability of the Treasury Selic (or LFT) follows the Brazilian basic interest rate, the Selic, which is currently 14.25% per year.

In February, B3 launched the first index dedicated to the financial bills market - fixed income securities issued by banks -, aimed at evaluating and comparing the performance of these assets.

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